When purchasing a vehicle, you may understandably believe that if it looks like a van and is called a van then it is a van! However, in some cases, HMRC may treat them as cars and recent case law supports this.
In an Upper Tier Tribunal case, Coca Cola failed to overturn a previous decision that their VW Transporter Kombi vans were cars for benefit-in-kind (BIK) purposes. This has resulted in a significant backdated national insurance bill for the company and unexpected BIK liabilities for some of its employees.
The definition of a van under HMRC legislation is ‘a goods vehicle’ weighing less than 3.5 tonnes. A ‘goods vehicle’ is defined as a vehicle primarily suited for the conveyance of goods. The case found that VW Transporter Kombis had no primary purpose (i.e. could be equally suitable for carrying passengers and goods).
Modifications had been made to both vehicles and, as such, when considering if a vehicle is a van or a car for BIK purposes it will be necessary to understand the original specification as well as any subsequent modifications to the vehicle. The test looks at the construction of the vehicle, however, and not how it is actually used.
Other considerations
The test for capital allowances is similar to that of the BIK definition. A van which is deemed to be a car would therefore not be eligible for the 100% relief under the annual investment allowance (AIA). Instead, it would likely only be subject to capital allowances relief at a rate of 6% per annum.
For VAT purposes, the definition of a car includes a payload of under one tonne. In most cases, therefore, such vehicles should continue to be treated as vans for recovery of VAT.
How we can help
We can help to advise on whether a vehicle should be treated as a car or van for tax purposes as well as calculating the potential BIK charge and helping with reporting the benefits to HMRC.